The Effect of Expansion and Diversification Strategies on the Performance of Naivas Chain Store

Abstract

Firms in the current world are faced with many challenges as well as opportunities in the environment in which they operate. The world is dynamic and as such the external environment keeps on changing. The external environment is composed of the competitor environment, socio-political environment, economic environment and the cultural environment. These environments present both opportunities and threats to firms. In order for firms to excel in the industry in which they operate therefore, they need to understand the external environment in terms of the opportunities and threats presented so as to respond appropriately. This study aimed at identifying the effect of expansion and diversification strategies on the performance of Naivas Chain Store. A case study was applied in carrying out this study. The study was carried out at the headquarters of Naivas Chain Store at Sameer Business Park in Industrial Area. Data was collected from the heads of the various departments of the Chain and some managers within the departments through face to face interviews. The study gathered data mainly on product and service diversification, internal and external expansion, role of marketing and product promotion in expansion and diversification, role of research in expansion and diversification and expansion and diversification strategies versus performance. The data collected was analysed using content analysis. The results of the study indicated that the Chain engages in product and service diversification within their branches. Expansion and diversification of products and services was a continuous process that is usually based on a thorough research and analysis aimed at identifying gaps in the market. The Chain had established new branches and still had plans of opening more branches in the near future. With a lot of marketing and product promotion activities done by the Chain, the Chain was able to attract and retain customers enhancing its sales. The efforts of the Chain to diversify and expand its operations had, in most cases, positive effect on performance. Negative effect of expansion and diversification are witnessed in cases of failure of new products and huge investment costs incurred during expansion. The study recommended that a thorough scanning of the external environment be done prior to implementation of any strategy since the external environment affect the operations and hence the performance of firms. Firms also need to understand that each firm is unique in its own ways and therefore a successful strategy in one firm doesn’t mean that the same strategy will be successful in all firms. The study suggested that further research be conducted to identify the factors that affect the implementation of expansion and diversification strategies and whether expansion and diversification strategies have a positive effect on performance generally.